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Author: 


Collins,  James  Homer 


Title: 


Methods  of  wholesale 
distribution  of  fruits... 

Place: 

Washington,  D.C. 

Date: 

1915 


COLUMBIA  UNIVERSITY  LIBRARIES 
PRESERVATION  DIVISION 

BIBLIOGRAPHIC  MICROFORM  TARGET 


MASTER   NEGATIVE   # 


ORIGINAL  MATERIAL  AS  FILMED  -    EXISTING  BIBLIOGRAPHIC  RECORD 


I 


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Collins,  James  Homer. 

...  Methods  of  wholesale  distribution  of  fruits  and  vege- 
tables on  large  markets.  By  J.  H.  Collins  and  J.  W. 
Fisher,  jr.  ...  and  Wells  A.  Sherman  ...  Washington 
[Govt,  print,  off.]  1915. 

28  p.  incl.  illus.,  diagrs.    ZS"".     (U.  S.    Dept.  of  agriculture.    Bulletin 
no.  267) 

Contribution  from  the  Office  of  markets  and  rural  organization. 

1.  Farm  produce— Marketing,    il.  Marketing  of  farm  produccj      i.  Fisher, 
John   Wclton,  (joint  author.\    ii.   Sherman,   Wells  Alvord,  n'oint  aiithor.X 
III.  Title.  V  / 

Agr  15-1136 


Library,  U.  S.  Dept.  of 


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UNITED  STATES  DEPARTMENT 


GRICULTURE 


BULLETIN  No.  267 

_         Contribution  from  Office  of  Markets  and  Rural  Organization 
'''^fU  CHARLES  J.  BRAND,  Chief 


Washington,  D.  C. 


August  16, 1915 


-2^ 


H 


METHODS  OF  WHOLESALE  DISTRIBUTION  OF  FRUITS 
AND  VEGETABLES  ON  LARGE  MARKETS.^ 

By  J.  H.  Collins  and  J.  W.  Fisheb,  Jr.,  Scientific  Assistants,  and  Wells  A. 

Shebman,  Specialist  in  Market  Surveys. 


\^\JLAJLaaJL4^ 


J) 


CONTENTS. 


Page. 

Introduction 1 

Necessity  for  distributing  agencies 2 

Methods  of  receiving 3 

Inspection    . 4 

Rejections 5 

Terminal      distribution     and      sales 

methods 8 

Causes  of  complicated  methods.  11 

Sales  by  brokers ^ 11 

Auction   sales 14 

Car-lot  wholesalers 16 


Page. 

Terminal  distribution,  etc. — Contd. 
Sales  through  commission   mer- 
chants   17 

Jobber's  sales 19 

Public   markets 20 

Distribution  channels 21 

Losses  and  wastes 23 

Conclusion    . 24 

Summary    24 

Glossary 26 


INTRODUCTION. 


N. 


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The  details  of  our  present  system  of  terminal  distribution  at  large 
market  centers  are  practically  unknown  to  many  producers  and  con- 
sumers. The  elaborate  commercial  machinery  whereby  fruits  and 
vegetables  are  brought  from  distant  production  areas  to  our  large 
cities  and  are  there  received,  divided  into  smaller  lots,  and  finally 
passed  on  to  the  consumer  is  an  unlmown  mechanism  to  the  layman. 
Much  confusion  and  unnecessary  explanation  could  be  avoided  if 
those  outside  the  produce  trade  had  a  clearer  idea  of  the  processes 
incident  to  the  marketing  and  distribution  of  perishable  food  prod- 
ucts. This  is  especially  true  in  the  case  of  the  small  shipper.  Goods 
which  have  reached  a  large  market  usually  have  passed  from  the  pro- 
ducer's control,  but  the  fact  remains  that  an  accurate  knowledge  of 

^  For  a  discussion  of  outlets  and  methods  of  sale  for  shippers  of  fruits  and  vegetables, 
«e€  Bui.  266,  U.  S.  Dept  of  Agriculture,  by  Fisher,  J.  W.,  jr. ;  Collins,  J.  H.,  and  Sher- 
man, Wells,  A. 

NoTB. — This  bulletin  should  be  of  interest  to  shippers,  dealers,  and  consumers  of  fruits 
and  vegetables  throughout  the  United  States. 

96017°— Bull.  267—15 1  , 


U 


\' 


'X, 


2  BULLETIN  287,  V.  S.  DEPARTMENT  OF  AGMCXTLTUEE. 

the  means  whereby  his  produce  finally  reaches  the  consumer  miirht 
This  buUetin  is  designed  to  assist  the  shipper  in  oht«minrr     v^,, 

kets  whiVh  T^^^i^r^  *-,  A         1    6^"ciai  practices  on  the  larger  mar- 

are  to  be  secured.  ^  ***  ''**'^  **'^""»  results 

exactly  the  same  sense  in  all  paS  ofLt^rv^r  T  °"*  T*^ 
be  consulted  freely.  country,  this  glossary  should 

NECESSITY  FOR  DISTRIBUTING  AGENCIES. 

o„raS;s:Lfbri;irerthf^^^^^ 

and  consumer.    This  is  as  tZT^  ,f     '"^**  ^*'''*'^  producer 

condition  has  b^uglt  C utl?  Z^Tffi '^u" ''  "  P'*^^'^''"^-    ^h^^ 

specialists  have  beef  re^^^d  to'TLtS^Sriblnl?  "' 
crops  over  wide  arPAQ    P^^o^      i.        \      ,        aistribution  of  large 

and^herearefu^sa'Su^^ttrgl^t^^^^^^^^^  ^"4 

in  niost  cases  along  J^^^^s  tdTeXusrr  ^^  "^^^  ^'^  "^^^^ 

During  recent  /ears Sei;  faf b^^"^  ^Jt  SaT^f  "^ T''''^"^"'' 
those  engaged  in  food  distribution     fZJI  .,  agitation  against 

as  to  just  who  these  -ddWnare^nd  wff  WiZ  2*"  ^'"* 
form.  It  IS  probably  not  coins  too  f « r  Tc  Ti,  f^*'*  •'"^  ^^J  Per- 
the  middleman  is  a  rathefhafir/fi^  ■''*''''*'  ***  ^'^^  ""initiated, 
tion  is  to  levy,  arbit^rilv  abl "  !  k  "^  P"^°'  ^'^«*  ^^^ief  fune^ 
from  the  prXrTJhe  ^^^"7  ^J  T  f "  '""-^^'"^^  ?"-'"» 
been  directed  to  increase^^f^tf '  ^K  '"*""'  *»'  *^"  P"''"^  '^''^ 
Evidently  it  has  never  ru'f,n  f"°,  ***  ^^''^  "'"d^^d- 

economic  conditior^oX;:?  per^^e  r  '^''"""'/"^  "'°""  *»»** 
of  a  marketing  agency  whfch  was  trpV  a  pa^f  ^r  'T '  ^"f "       ' 
business  competition  must  elimin-f/jii  •  ^^       ..       ®*^°®'"  <«"  ^»ter 
perform  no  definite  uS  ftXn^       intermediate  agencies  which 


J. 


^; 


1 


\, 


WHOLESALE  DISTRIBUTION   OF  FRUITS  AND  VEGETABLES.  3 

ing.  Production  during  the  last  decade  has  increased  greatly,  and  as 
a  natural  consequence  improved  methods  and  facilities  for  handling 
the  increase  have  become  necessary.  Keeping  pace  with  increased 
production  has  come  the  demand  of  consumers  for  more  elaborate 
and  efficient  service.  Little  thought  is  given  to  the  fact  that  service 
can  become  a  very  expensive  luxury.  With  the  widening  of  the 
distance  between  the  city  and  the  sources  of  its  fruit  and  vegetable 
supplies  there  has  arisen  the  necessity  for  special  agencies  to  meet 
the  changed  conditions. 

The  fact  should  be  recognized  that  present  distributive  machinery, 
with  all  its  strong  points  and  its  weaknesses,  has  been  created  of 
necessity,  and  it  has  weathered  the  storm  of  much  adverse  criticism, 
because  every  part  of  the  country  is  now  enjoying  the  perishable 
products  of  the  most  remote  districts.  Any  readjustment  of  present 
market  practices  must  be  based  upon  the  fact  that  some  agency  must 
contmue  to  perform  the  functions  of  the  present-day  middleman. 

Handling  goods  through  a  large  market  is  a  very  complex  process 
The  problems  involved  differ  greatly  from  those  of  production. 
Usually  one  man  or  one  firm  can  not  handle  both  production  and 
distribution  and  succeed  at  both.  The  vast  volume  of  business 
transacted  at  large  market  centers  makes  necessary  some  special 
agencies  which  can  devote  all  their  energies  to  distribution. 
Especially  does  the  machinery  for  efficient  marketing  become  neces- 
sary when  perishable  goods  are  to  be  handled.  Commodities  of  this 
sort  must  be  moved  rapidly,  must  be  distributed  evenly,  and  from 
their  very  nature  permit  of  no  weakness  in  distributive  machinery, 
if  they  are  to  be  sold  at  a  profit. 

METHODS  OF  RECEIVING. 

As  soon  as  a  shipper  starts  a  car  of  perishables  toward  the  market, 
he  should  notify  the  consignee.  This  one  important  detail  is  often 
omitted  or  neglected  by  shippers.  Little  thought  is  given  to  the  fact 
that  the  consignee,  especially  if  a  large  firm,  may  have  many  other 
shipments  en  route  or  on  hand.  The  viewpoint  of  the  small  shipper 
whose  annual  output  may  be  from  1  to  10  carloads  is  narrowed.  The 
one  or  two  cars  which  he  may  be  rolling  toward  market  are  very  im- 
portant to  him,  and  he  usually  loses  sight  of  the  fact  that  his  prop- 
erty on  arrival  at  the  market  will  be  only  a  very  insignificant  portion 
of  the  total  receipts.  The  firm  to  which  the  shipment  is  made  may 
have  more  carloads  on  track  and  for  sale  in  one  day  than  the  shipper 
would  forward  in  five  years. 

Keeping  records  of  all  these  shipments  is  a  great  burden  on  large, 
wholesale,  distributing  concerns,  and  lack  of  proper  notification  often 
causes  much  needless  confusion  and  costly  delay  at  distributing  cen- 


4  BULLETIN   267,  TJ.   S.   DEPARTMENT  OF  AGRICULTUBE. 

ters.  A  grower  who  will  have  one  or  more  cars  of  produce  to  market 
should  get  in  touch  with  the  concern  to  which  he  expects  to  ship  his 
goods  some  time  before  they  are  ready  to  move.  Thus  he  may  secure 
some  valuable  suggestions  as  to  packing,  loading,  or  routing  the  ship- 
ment, and  these  preliminary  negotiations  will  pave  the  way  to  a 
better  understanding  of  terms  and  the  means  whereby  the  produce 
may  be  handled  rapidly  and  efficiently.  In  cases  where  it  is  advisable 
to  divert  cars  in  transit  or  where  special  preparations  must  be  made 
to  receive  and  distribute  goods  immediately,  notification  of  consignee 
by  prepaid  telegram  should  be  coincident  with  shipment.  Also,  when 
there  is  any  doubt  about  a  letter  reaching  the  consignee  before  the 
car  arrives  it  is  important  that  the  wire  be  used.  Telegraphic  noti- 
fications must  make  plain  just  what  the  shipper  has  in  mind.  For 
instance,  a  shipper  in  Florida  may  consign  a  car  to  a  commission 
merchant  in  Kansas  City,  and  telegraph  to  him  as  follows: 

Am  to-day  consigning  to  you  car  FGE  16438  containing  330  boxes  Bright  and 
Fancy  Bright  grapefruit;  30  boxes  36's,  100  boxes  46's,  balance  54'a  Routed 
via  Atlantic  Coast  Line,  Louisville  &  Nashville,  Missouri  Pacific.  Handle  for 
my  account.    Letter  and  bill  of  lading  follow. 

The  letter  which  follows  should  embody  the  following  details: 
Name  of  commodity,  date  of  shipment,  whether  shipped  by  freight 
or  express,  route,  car  number  and  initial,  number  of  packages,  size 
and  type  of  packages,  variety,  and  grade. 

In  case  the  car  is  billed  to  a  broker  or  sales  agency  the  instruc- 
tions, whether  by  telegram  or  letter,  should  read,  "  Sale  subject  to 
confirmation  by  shipper,"  as  in  this  way  the  shipper  has  the  final 
word  as  to  the  disposition  of  his  property. 

Inexperienced  shippers  may  overlook  the  fact  that  all  railway  cars 
are  designated  by  number  and  initials  painted  on  the  outside  of  the 
car.  Thus  a  refrigerator  car  owned  by  the  Great  Northern  Railroad 
Co.,  No.  51023,  would  be  known  as  GN  51023.  Car  16438,  operated 
by  the  Fruit  Growers'  Express,  is  designated  as  FGE  16438. 

Shortly  before  the  goods  reach  their  destination  or  immediately 
after  arrival  the  consignee  is  notified  by  the  railroad.  When  highly 
perishable  goods,  such  as  strawberries,  are  moving,  some  railroads 
receive  passing  reports  of  cars  en  route  and  notify  the  consignee 
by  telephone  several  hours  before  the  car  arrives,  thus  giving  him 
opportunity  to  issue  any  special  instructions  or  to  make  arrangements 
for  prompt  handling  and  distribution  of  the  contents  on  the  arrival 
of  the  car.  In  handling  fruits  and  vegetables  not  so  perishable,  the 
railroad,  as  a  rule,  notifies  the  consignee  after  the  car  has  arrived 
and  confirms  this  telephone  notification  by  a  mailed  card,  giving  car 
number,  initials,  and  contents. 

When  no  special  instructions  are  given  by  the  consignee  many  rail- 
roads place  the  cars  on  their  team  track  soon  after  arrival  in  order 


1 


l\ 


J 


Wholesale  distribution  of  fbuits  and  vegetables.         H 

that  inspection  and  unloading  may  be  accomplished  immediately. 
When  firms  have  private  sidings  running  into  their  places  of  busi- 
ness, it  is  usual  for  all  cars  shipped  direct  to  them  to  be  placed  on 
these  sidings  without  special  instructions.  Prompt  notification  by 
railroads  enables  the  consignees  to  divert  cars  to  auction  sidings 
without  loss  of  time  when  it  is  expected  that  the  contents  will  be 
handled  through  an  auction. 

INSPECTION. 

Soon  after  arrival  it  is  necessary  that  an  inspection  be  made.  The 
inspector  may  be  the  consignee  or  his  representative.  In  case  the 
car  has  been  shipped  to  a  broker  or  a  commission  man,  preliminary 
inspection  is  often  made  by  a  prospective  buyer.  If  the  shipment 
was  made  under  a  "  straight "  bill  of  lading,  it  is  necessary  that  the 
inspector  have  a  written  order  issued  by  the  consignee  in  a  form 
similar  to  the  following: 

Agent,  Missoubi  Pacific  Railroad  Company, 

Kansas  City,  Missouri. 
Deab  Sib  :  Please  permit  bearer,  John  Jones,  to  inspect  the  contents  of  car 
GN  51023  now  on  track,  consigned  to  me. 

(Signed)  J.  J.  Doe. 

Whenever  a  shipment  is  billed  "Order  notify"  or  "Shipper's 
order,"  the  bill  of  lading  should  be  indorsed  thus :  "  Permit  inspec- 
tion without  surrender  of  bill  of  lading."  This  will  remove  the 
necessity  for  issuing  inspection  orders.  As  ^  matter  of  fact,  all  bills 
of  lading  whether  "straight"  or  "order"  should  read,  "Permit 
inspection,"  in  order  to  avoid  possible  complications  at  destination. 

Usually  the  right  of  inspection  by  the  purchaser  is  assured  in  the 
case  of  perishable  goods,  as  it  would  be  very  unbusinesslike  to  pur- 
chase or  accept  a  carload  of  perishables  without  a  careful  inspection. 

In  all  cases  where  the  shipper  has  no  market  representative  he 
should  arrange  to  have  inspection  made  by  disinterested  inspectors 
in  case  the  shipment  is  rejected. 

REJECTIONS. 

There  are  a  surprising  number  of  rejections  on  large  markets 
where  great  quantities  of  perishable  goods  are  handled.  Few  ship- 
pers have  any  idea  how  large  this  number  is.  The  facts  for  one  prod- 
uct in  one  market  may  illustrate  this  point. 

From  the  beginning  of  the  shipping  season  to  July  28,  1914,  3 
of  the  15  railroads  touching  Kansas  City,  Mo.,  brought  to  that 
market  227  cars  of  watermelons.    Of  this  number  47  were  rejected 


e 


BULLETIN  267,  V.  8.  DEPABTMENT  OF  AGRICtrLTUBE. 


/  \ 


outright  and  a  number  of  the  remainder  were  reconsigned  and  subse- 
quently refused  at  other  points.  This  example  does  not,  of  course, 
indicate  normal  conditions  on  this  market,  nor  is  this  particular  dis- 
tribution center  more  prone  to  reject  produce  than  are  other  similar 
markets.'  No  exact  data  as  to  the  causes  for  these  rejections  are  avail- 
able and  unfortunate  conditions  may  have  justified  the  refusal  of  any 
or  all  of  these  melons.  As  a  matter  of  fact,  carelessness  in  grading, 
packing,  and  loading  are  largely  responsible  for  the  high  percentage 
of  rejections  which  occurs  in  the  handling  of  fruits  and  vegetables. 
Perishable  goods,  from  their  very  nature,  may  be  said  to  invite  rejec- 
tions, and  the  figures  here  given  are  probably  indicative  of  conditions 
in  other  distribution  centers  during  periods  of  market  depression. 


JUST   CAUSES   FOB   REJECTION. 


Satisfactory  compromises  can  be  made  only  where  both  the  shipper 
and  the  buyer  are  broad  minded  and  willing  to  make  reasonable  con- 
cessions. A  very  common  source  of  misunderstanding  is  shrinkage. 
A  shipper  who  sends  fruits  or  vegetables  several  hundred  miles  to 
market  can  not  imderstand  why  his  shipment  should  weigh  so  much 
less  on  arrival  than  it  did  at  the  point  of  origin.  Thus  the  invoice 
weight  of  a  car  of  bulk  apples  shipped  from  southwest  Missouri  on 
October  16, 1914,  was  22,427  poimds.  These  apples  arrived  at  market 
on  October  23,  and  were  reweighed,  barreled,  and  sold.  The  weight  of 
the  apples  at  destination  was  17,971  pounds,  indicating  a  loss  of  4,456 
poimds,  or  19  per  cent,  due  to  shrinkage  in  transit  and  to  the  dis- 
carding of  a  small  quantity  of  culls  and  spoiled  fruit.  Very  few 
shippers  could  be  made  to  believe  that  a  legitimate  loss  as  great  as 
this  could  occur  even  though  the  shipment  was  graded  and  loaded 
carelessly. 

An  all  too  common  source  of  trouble  between  shippers  and  con- 
signees is  nonfulfillment  of  contract  by  the  shipper.  This  may  fur- 
nish just  ground  for  a  rejection.  Thus,  a  shipment  may  be  due  to 
leave  the  point  of  origin  on  a  certain  day,  but  the  actual  movement 
may  be  postponed  by  the  shipper  for  several  days.  A  break  in  the 
market  in  the  meantime,  if  the  purchaser  gives  prompt  notice  to  the 
shipper,  will  justify  him  in  refusing  the  shipment  when  it  finally 
arrives.  Again,  goods  are  often  not  up  to  the  grade  specified  in  the 
contract.  For  instance,  a  grower  agrees  to  ship  a  carload  of  fancy, 
barreled  apples.  When  the  car  arrives,  the  purchaser  discovers  that 
from  25  to  50  per  cent  of  the  shipment  is  below  the  standard  specified 
and  he  very  justly  refuses  the  entire  shipment  or  demands  a  consider- 
able allowance.  Often  with  the  best  management  there  remain  possi- 
bilities for  great  losses,  so  that  both  producers  and  distributors  should 


r^i-i 


JUto 


WHOLESALE  DISTRIBUTION  OP  PBUITS  AND  VEGETABLES.  7 

take  into  consideration  the  character  of  the  product  which  is  being 
moved,  live  up  to  all  agreements,  and  accept  any  losses  which  justly 
fall  to  either. 

UNJUST  REJECTIONS. 

A  break  in  the  market  price  may  be  another  cause  for  rejection 
and  one  which  can  not  be  justified.  A  dealer  may  buy  a  carload  of 
a  certain  commodity  and  certain  grade  and  agree  to  pay  a  specified 
price.  Before  the  car  arrives  the  market  price  may  drop  materially. 
To  accept  the  produce  at  the  contract  price  may  entail  considerable 
loss.  Hence,  when  the  car  arrives  it  is  given  a  very  rigid  inspection, 
and  it  is  seldom  difficult  to  discover  a  number  of  defects  in  perish- 
able produce  when  the  inspector  is  devoting  close  attention  to  the 
effort.  Thus  a  drop  in  market  price  may  convert  a  car  of  extra  fancy 
apples  into  "  C-grade  "  stuff  in  the  opinion  of  the  buyer  who  sees  a 
loss  confronting  him. 

This  practice  of  rejecting  on  a  declining  market  is  being  dis- 
approved more  and  more  by  reliable  concerns.  It  injures  the  busi- 
ness standing  of  the  buyer.  One  of  the  worst  things  that  can  be 
said  about  a  produce  dealer  is  that  he  is  a  ready  rejector.  Refusal 
on  a  declining  market  is  unfair  to  everyone  concerned.  In  the  case 
of  the  buyer,  the  reputation  of  a  firm  may  be  seriously  injured  by  this 
practice.  In  addition,  if  the  buyer  is  able  to  effect  a  compromise  with 
the  shipper  whereby  he  is  able  to  secure  the  produce  for  a  greatly 
reduced  price,  he  can  afford  to  throw  the  produce  on  the  market  at  a 
price  which  will  depress  it  still  further. 

All  firms  which  propose  to  remain  in  .business  are  anxious  to  build 
up  reputations  for  integrity.  All  prominent  firms  have  established 
reputations  to  maintain  and  transactions  with  them  are  usually  safe. 
Many  firms  operating  on  a  smaller  scale  have  gilt-edged  reputations 
where  they  are  known  and  are  ambitious  to  expand  their  business  by 
giving  the  best  service  possible. 

Most  of  the  abuses  with  which  the  distributing  trade  in  general  is 
charged  are  traceable  directly  to  the  operations  of  irresponsible  deal- 
ers, with  little  financial  backing,  who  do  not  remain  very  long  in 
business  in  any  one  market.  Unjustified  rejection  is  coming  to  be 
confined  more  and  more  to  comparatively  unimportant  marketing 
concerns. 

BEDRESS  FOB  BEJECTIONS. 

In  case  a  car  is  rejected  the  shipper  may  sell  elsewhere,  or  may 
make  an  allowance  on  the  price  to  the  original  purchaser  in  order 
to  close  the  transaction.  A  claim  may  be  entered  against  the  rail- 
road in  case  the  company  was  at  fault  in  any  way.    Usually  dealers 


8 


BtJLLETllf  26'!,  U.  S.  DEPaHtMeKT  OP  AGBlClTLTtTRE. 


/ 


will  accept  a  car  and  sell  it  for  what  it  will  bring,  and  then  enter 
a  claim  against  the  railroad  through  their  traffic  department  in 
favor  of  the  shipper.  When  this  is  done  the  shipment  is  accepted 
from  the  railroad  "  imder  protest,"  which  means  that  the  consignee 
reserves  the  right  to  enter  a  claim  later.  Thus,  if  a  car  of  boxed 
apples,  for  instance,  should  arrive  at  destination  in  bad  condition, 
the  consignee  might  give  written  notice  to  the  railroad  of  condi- 
tional acceptance  in  some  such  form  as  follows: 

Chicago,  III.,  September  20,  1914. 

Mr.  J.  J.  Doe, 

Local  Freight  Agent,  X.  Y,  d  Z,  R.  R.  Co.,  Chicago,  III, 

Dear  Sib:  On  September  20,  1914,  you  notified  us  of  the  arrival  of  car  FGB 
29853,  containing  apples.  This  is  to  inform  you  that  the  contents  of  this  car 
did  not  arrive  in  good  order,  and  we  hereby  notify  you  that  the  receipt  of  same 
and  payment  of  freight  is  made  under  protest,  and  claim  will  be  entered  for 
the  following   reason: 

Entire  car  is  badly  shifted,  causing  a  number  of  boxes  to  be  broken  and 
contents  spilled  on  floor.  Exact  amount  of  damage  can  not  be  determined 
until  car  is  unloaded. 

(Signed) , 

Consignee, 

« 

There  are  several  essentials  to  be  observed  in  filing  claims.  A  writ- 
ten notice  of  the  intended  claim  should  be  filed  with  the  railroad  at 
once,  so  as  to  permit  the  company  to  make  immediate  inspection  in 
order  to  protect  itself.  As  soon  as  the  exact  loss  is  ascertained  by  the 
consignee,  claims  should  be  filed  in  accordance  with  printed  railroad 
instructions  and  should  offer  complete  details,  backed  in  every  case 
by  affidavits.  It  is  very  important  that  the  original  bill  of  lading 
be  in  the  possession  of  the  party  who  files  the  claim,  otherwise  there 
may  be  great  difficulty  in  collecting. 

One  advantage  of  handling  business  through  a  cooperative  organi- 
zation or  other  large  company  is  the  ease  and  rapidity  with  which 
these  concerns  can  collect  just  railroad  claims.  The  large  associations 
are  in  a  position  to  employ  trained  traffic  managers,  who,  by  care- 
fully submitting  only  those  claims  which  are  clearly  justified  and  by 
backing  up  those  claims  with  affidavits  and  evidence,  are  able  to 
make  prompt  and  full  collections. 

TERMINAL  DISTRIBUTION  AND  SALES  METHODS. 

A  panoramic  view  of  the  activities  at  one  of  the  large  distribution 
centers  of  the  country  would  probably  reveal  some  astonishing  facts 
to  the  layman.  When  sales  are  being  made  on  one  of  our  large 
markets,  the  mingling  of  various  types  of  middlemen  and  the  activi- 


J, 


I 


WHOLESALE  DISTRIBUTION   OF  FRUITS  AND  VEGETABLES.  9 

ties  being  carried  on  cause  the  market  to  present  an  appearance 
peculiar  to  the  produce  trade.  A  great  amount  is  moved  by  the 
wholesale  trade  in  the  very  early  morning.  At  this  time,  before  most 
of  the  activities  in  the  city  have  started,  produce  distributors  find 
their  busiest  period.  Trucks  of  fruit  and  vegetables  from  freshly 
"  broken  "  cars  are  being  unloaded  on  the  walk  before  each  business 
house;  ranks  of  crates,  boxes,  and  baskets  nearly  block  all  passage- 
ways; and  more  or  less  elaborate  displays  of  the  day's  offerings  are 
being  arranged  to  attract  passing  buyers.  Jobbers,  grocers,  huck- 
sters, and  fruitstand  vendors  elbow  their  way  through  narrow  pas- 
sageways between  the  tiers  of  produce,  stopping  every  few  feet  to 
inspect  goods  and  ask  prices.  Street  salesmen  for  each  produce  firm 
endeavor  to  withstand  the  assault  of  the  throng  and  each  attempts 
to  devote  attention  to  three  or  four  buyers  at  once.  Prices  are 
quoted  and  violent  arguments  take  place  as  to  quality,  pack,  and 
price.  After  much  wrangling  and  discussion  of  price  and  terms, 
sales  are  finally  made. 

Figure  1  shows  South  Water  Street,  Chicago,  at  8,30  a.  m.,  which 
is  after  the  rush  hours.  There  is  not  sufficient  light  to  secure  a 
good  picture  when  the  congestion  is  greatest. 

Where  a  few  years  ago  goods  coming  to  market  passed,  as  a  rule, 
by  definite,  direct  channels  to  the  consumer,  to-day  the  same  goods 
may  take  any  one  of  a  great  number  of  channels,  whose  directness 
may  or  may  not  be  in  proportion  to  the  size,  type,  or  quality  of.  the 
shipment.  Large  distributing  organizations  and  firms  have  grown 
and  spread  their  business  activities  over  much  wider  fields,  but  each 
has  worked  along  its  own  lines,  and  each  by  itself  to  a  certain 
extent ;  hence  the  present  lack  of  uniform  practices  and  systems.  In 
other  words,  there  is  no  continuous  articulation  between  the  different 
phases  of  distribution.  This  does  not  mean  that  members  of  the 
trade  have  no  common  interests.  As  a  matter  of  fact,  their  business 
success  depends  to  a  large  extent  on  their  ability  to  secure  when 
needed  the  help  and  cooperation  of  certain  of  their  associates. 
This  community  of  interests,  however,  does  not  obtain  among  all 
those  engaged  in  distribution.  Distributors  are  often  working  at 
cross-purposes,  so  that  general  economy  and  efficiency  are  lost  in 
the  conflict  of  interests. 

In  this  discussion  rather  arbitrary  lines  are  laid  down  as  bound- 
aries for  the  activities  of  various  types  of  middlemen,  yet  in  actual 
practice  these  activities  so  overlap  and  encroach  upon  each  other 
that  resulting  market  practices  are  exceedingly  complicated.  . 

Goods  do  not  pass  in  regular  order  through  definite  channels,  but 
are  sold  by  any  available  means.    While  for  purposes  of  clearness  the 
distinction  between  the  various  types  of  distributing  agencies  has 
96017''— Bull.  267—15 2 


Z2 


10 


BULLETIN  267,«U.   S.  DEPARTMENT  OF  AGRICULTURE. 


been  very  closely  drawn  in  this  bulletin,  this  distinction  is  not  so 
apparent  in  actual  practice.  One  man  or  one  firm  may  combine  the 
functions  of  several  middlemen.     Many  distributors  act  simulta- 


s 


d 


© 
eo 

od 


I 

iS 
u 

hi 

•M 

•M 

O 

m 


neously  as  car-lot  wholesalers,  commission  men,  and  jobbers.  As  a 
matter  of  fact,  few  firms  confine  their  activities  to  one  line  of  busi- 
ness.   Thus,  of  the  goods  sold  by  a  firm  on  one  day,  part  may  have 


WHOLESALE   DISTRIBUTION   OF  FRUITS  AND  VEGETABLES.  11 

been  purchased  outright  in  car  lots,  part  purchased  in  small  lots  from 
other  receivers,  and  part  consigned  on  commission.  While  one  firm 
may  act  in  the  triple  capacity  of  car-lot  wholesaler,  commission  man, 
and  jobber,  the  three  lines  of  business  thus  carried  on  at  the  same 
time  are  very  distinct  and  for  purposes  of  discussion  may  be  consid- 
ered as  being  performed  by  three  separate  firms.  In  every  large 
market  there  are  concerns  which  confine  themselves  to  one  of  these 
lines,  but  by  far  the  greater  number  of  produce  distributors  do  busi- 
ness in  several  lines. 

CAUSES  OF  COMPLICATED  METHODS. 

Various  factors  have  contributed  to  the  development  of  manifold 
methods  of  marketing.  The  use  of  refrigerator  cars  for  shipping 
perishables  from  distant  producing  sections  and  the  attendant  growth 
of  business  in  handling  goods  out  of  season  have  had  a  tremendous 
effect.  With  the  radius  of  the  zone  of  supplies  thus  lengthened,  mar- 
keting activities  have  increased  to  keep  pace  with  the  movement,  and 
with  increased  activity  have  come  increases  in  complexity  and  in 
costs. 

When  consideration  is  given  to  the  vast  territory  which  supplies 
any  one  of  our  large  cities  with  its  fruits  and  vegetables,  the  wonder 
is  that  distributive  machinery  is  not  more  hampered  and  labored  in 
its  action.  Thus,  on  one  day  in  the  fall  of  1914  Kansas  City  was 
receiving  peaches  from  Utah,  Idaho,  and  Washington ;  grapes  from 
California  and  Michigan;  cantaloupes  from  Colorado,  New  Mexico, 
Arkansas,  and  Missouri ;  pears  from  California  and  Colorado ;  sweet 
potatoes  from  Virginia  and  Georgia;  and  apples  from  Colorado, 
Washington,  New  Mexico,  New  York,  Arkansas,  and  Missouri.  With 
daily  supplies  coming  from  all  sections  of  the  country  and  with  the 
necessity  for  adjusting  machinery  to  care  for  varying  quantities,  it 
is  not  to  be  expected  that  the  flow  of  produce  through  market  chan- 
nels will  be  smooth  and  uninterrupted,  nor  that  prices  will  be  stable 
and  uniformly  satisfactory. 

SALES  BY  BROKERS. 

In  spite  of  general  complexity,  however,  explanations  of  the  sales 
methods  of  some  of  the  principal,  independent,  distributing  agencies 
may  prove  useful.  Thus,  there  is  the  broker  who  handles  car  lots 
only,  as  a  rule,  and  who  draws  his  business  from  cooperative  asso- 
ciations, country  speculators,  large  operators,  private  exchanges,  and 
in  some  cases  private  shippers.  According  to  strict  interpretation, 
the  term  "  broker  "  can  be  applied  only  to  those  middlemen  who  act 
as  intermediaries  between  the  principals  in  contemplated  transac- 
tions and  have  nothing  further  to  do  with  the  contract  itself.  The 
broker  normally  does  not  have  possession  of  the  articles  he  deals  in, 


X: 


INTENTIONAL  SECOND  EXPOSURE 


10 


BULLETIN   267,.  U.   S.   DEPARTMENT  OF  AGRICULTURE. 


been  very  closely  drawn  in  this  bulletin,  this  distinction  is  not  so 
apparent  in  actual  practice.  One  man  or  one  firm  may  combine  the 
functions  of  several  middlemen.     Many  distributors  act  simulta- 


s 


i 


© 

CO 
GO 


o 


o 
o 

u 


S 

o 


%-•        V 


neously  as  car-lot  wholesalers,  commission  men,  and  jobbers.  As  a 
matter  of  fact,  few  firms  confine  their  activities  to  one  line  of  busi- 
ness.   Thus,  of  the  goods  sold  by  a  firm  on  one  day,  part  may  have 


WHOLESALE   DISTRIBUTION   OF   FRUITS  AND  VEGETABLES.  11 

been  purchased  outright  in  car  lots,  part  purchased  in  small  lots  from 
other  receivers,  and  part  consigned  on  commission.  While  one  firm 
may  act  in  the  triple  capacity  of  car-lot  wholesaler,  commission  man, 
and  jobber,  the  three  lines  of  business  thus  carried  on  at  the  same 
time  are  very  distinct  and  for  purposes  of  discussion  may  be  consid- 
ered as  being  performed  by  three  separate  firms.  In  every  large 
market  there  are  concerns  which  confine  themselves  to  one  of  these 
lines,  but  by  far  the  greater  number  of  produce  distributors  do  busi- 
ness in  several  lines. 

CAUSES   OF  COMPLICATED  METHODS. 

Various  factors  have  contributed  to  the  development  of  manifold 
methods  of  marketing.  The  use  of  refrigerator  cars  for  shipping 
perishables  from  distant  producing  sections  and  the  attendant  growth 
of  business  in  handling  goods  out  of  season  have  had  a  tremendous 
effect.  With  the  radius  of  the  zone  of  supplies  thus  lengthened,  mar- 
keting activities  have  increased  to  keep  pace  with  the  movement,  and 
with  increased  activity  have  come  increases  in  complexity  and  in 
costs. 

When  consideration  is  given  to  the  vast  territory  which  supplies 
any  one  of  our  large  cities  with  its  fruits  and  vegetables,  the  wonder 
is  that  distributive  machinery  is  not  more  hampered  and  labored  in 
its  action.  Thus,  on  one  day  in  the  fall  of  1914  Kansas  City  was 
receiving  peaches  from  Utah,  Idaho,  and  Washington;  grapes  from 
California  and  Michigan;  cantaloupes  from  Colorado,  New  Mexico, 
Arkansas,  and  Missouri ;  pears  from  California  and  Colorado ;  sweet 
potatoes  from  Virginia  and  Georgia;  and  apples  from  Colorado, 
Washington,  New  Mexico,  New  York,  Arkansas,  and  Missouri.  With 
daily  supplies  coming  from  all  sections  of  the  country  and  with  the 
necessity  for  adjusting  machinery  to  care  for  varying  quantities,  it 
is  not  to  be  expected  that  the  flow  of  produce  through  market  chan- 
nels will  be  smooth  and  uninterrupted,  nor  that  prices  will  be  stable 
and  uniformly  satisfactory. 

SALES  BY  BROKERS. 

In  spite  of  general  complexity,  however,  explanations  of  the  sales 
methods  of  some  of  the  principal,  independent,  distributing  agencies 
may  prove  useful.  Thus,  there  is  the  broker  who  handles  car  lots 
only,  as  a  rule,  and  who  draws  his  business  from  cooperative  asso- 
ciations, country  speculators,  large  operators,  private  exchanges,  and 
in  some  cases  private  shippers.  According  to  strict  interpretation, 
the  term  "  broker  "  can  be  applied  only  to  those  middlemen  who  act 
as  intermediaries  between  the  principals  in  contemplated  transac- 
tions and  have  nothing  further  to  do  with  the  contract  itself.  The 
broker  normally  does  not  have  possession  of  the  articles  he  deals  in, 


-V 


12 


BULLETIN  287,  U.   S.   DEPARTMENT  OF  AGRICULTURE. 


but  must  carry  on  all  business  in  the  name  of  his  principal.  Com- 
modities handled  by  brokers,  as  a  rule,  are  sold  to  car-lot  whole- 
salers or  jobbers. 

At  the  beginning  of  each  business  day  the  broker  looks  over  his 
business,  ascertains  conditions  on  other  markets,  and  takes  note  of 
the  number  of  cars  he  has  on  hand,  number  en  route,  etc.  With  all 
this  well  in  mind,  he  is  ready  to  approach  the  wholesale  trade.  His 
next  step  is  to  make  a  careful  canvass  of  the  wholesale  district,  visit- 
ing or  calling  up  by  telephone  all  those  who  may  be  interested  in 
what  he  has  to  offer.  When  a  possible  customer  is  found,  the  next 
step,  in  case  the  car  or  cars  have  arrived,  is  to  allow  the  prospective 
buyer  to  inspect  the  contents.  After  inspection,  satisfactory  terms 
are  arranged  and  then  before  the  sale  can  be  consummated  it  is  nec- 
essary that  the  shipper  confirm  the  broker's  action.  Assuming  that 
the  broker  is  selling  a  car  of  apples,  Ganos  and  Grimes  for  instance, 
he  may  telegraph  the  shipper  as  follows : 

Jones  offers  on  car  MC  sixteen  eight  fifty-four,  two  fifty  Ganos,  two  seventy- 
five  Grimes,  delivered. 

In  case  this  offer  is  satisfactory,  the  shipper's  reply  may  read : 

Confirm  car  MC  sixteen  eight  fifty-four  Jones,  two  fifty  Ganos,  two  seventy- 
five  Grimes,  delivered. 

Or  in  case  the  price  is  unsatisfactory,  the  shipper  might  refuse  as 
follows : 

Jones  too  low ;  car  MC  sixteen  eight  fifty-four ;  must  have  three  Grimes. 

Collection  is  often  made  through  a  bank  located  at  destination. 
The  shipper  sends  the  bill  of  lading  with  draft  attached  to  a  bank,  at 
the  time  the  car  is  shipped,  and  after  inspection  the  purchaser  pays 
the  draft  and  secures  the  bill  of  lading.  Some  large  shipping  organi- 
zations whose  responsibility  is  well  known  to  railroad  officials  often 
temporarily  retain  possession  of  the  original  bill  of  lading  and  effect 
delivery  by  a  signed  delivery  order  somewhat  as  follows: 

Kansas  City,  Mo.,  September  21,  191\. 

Agent,  Missouri  Pacific  Railboad  Co. 

Deab  Sib:  Please  deliver  on  this  order  without  bill  of  lading  car  of  apples 
C.  B.  &  Q.  36066  to  John  Jones,  Kansas  City.    We  pay  all  charges. 

The  bill  of  lading  is  retained  temporarily  in  this  case,  as  evidence 
of  former  ownership,  or  for  use  in  case  a  dispute  should  arise  later 
or  claim  be  entered.  It  is  absolutely  necessary  to  insert  the  clause 
"  We  pay  all  charges,"  as  in  many  cases  railroads  will  refuse  such  de- 
livery unless  it  is  understood  definitely  which  party  pays  the  freight. 

BBOKEB^S    SETTLEMENTS. 

Sales  by  brokers  are,  as  a  rule,  strictly  cash  transactions  and  col- 
lection is  made  when  delivery  is  offered.    All  cartage  expenses  in  get- 


% 


^ 


jhttiiiiiiiiM 


WHOLESALE  DISTRIBUTION   OF  FRUITS  AND  VEGET.IBLES.  13 

ting  the  goods  from  the  car  to  the  dealers'  place  of  business  are 
paid  by  the  buyer.  In  case  the  broker  did  not  make  a  direct  sale,  but 
handled  the  goods  through  auction,  his  activities  would  be  confined 
to  seeing  that  the  goods  arrived  at  the  auction  and  attending  the  sale 
to  withdraw  the  shipment  if  prices  were  unsatisfactory. 

bbokeb's  expenses. 

The  broker  perhaps  handles  more  business  at  less  cost  to  himself 
than  any  other  type  of  middleman.  He  has  no  considerable  amount 
of  capital  in  his  business  and  a  large  part  of  his  expenses  is  prac- 
tically fixed.  His  heaviest  items  of  expense  are  usually  rent,  clerical 
help,  and  telegraph  charges.  The  latter,  of  course,  varies  with  the 
amount  of  business  handled.  As  a  rule,  most  of  the  broker's  business 
is  composed  of  association  accounts  and  accounts  of  large  private 
shippers,  and  a  very  small  portion  is  drawn  from  small  shippers. 
The  broker  acts  as  the  exclusive  agent  on  his  market  for  each  con- 
cern that  he  represents,  and  since  he  handles  car  lots  only  and  moves 
large  quantities  in  relatively  short  periods  of  time  he  is  enabled  to 
render  important  services  at  a  very  low  cost  to  the  shipper. 

BBOKEB'S   abuses. 

Brokers  are  often  charged  with  misuse  of  their  privileges  in  that 
they  may  sometimes  speculate  on  goods  passing  through  their  hands. 
For  instance,  a  broker  may  make  returns  out  of  his  own  funds  for  a 
supposed  sale,  but  hold  the  produce  for  a  rising  market  before  actual 
"Sale  is  made.  If  the  expected  advance  occurs,  he  pockets  the  increase 
in  price.  This  practice  would  prevent  a  shipper  from  getting  just 
returns  and  his  goods  would  not  be  on  an  actively  competitive  basis 
with  other  market  offerings.  In  other  words,  such  sales  would  secure 
to  the  grower  or  shipper  the  lowest  market  price  quoted  on  the  day 
i-eturns  were  made  and  he  would  get  no  benefit  from  either  the  ex- 
pected rise  in  price  or  the  broker's  ability  as  a  salesman.  This  tend- 
ency toward  speculation  is  ordinarily  done  away  with  entirely  when 
there  is  direct  dealing  between  the  vendor  and  vendee,  so  far  as  the 
handling  of  money  is  concerned.  As  a  matter  of  fact,  according  to  a 
strict  interpretation  of  the  term,  the  shipper's  selling  agent  ceases  to 
be  a  broker  when  he  assumes  responsibility  for  collecting  and  remit- 
ting, and  so  the  term  "  broker  "  as  here  used  is  applied  according  to 
trade  usage  and  common  understanding.  Brokers  are  charged  some- 
times with  failing  truly  to  represent  the  shipper.  Being  always  in 
close  personal  touch  with  buyers  and  having  no  such  close  relation 
to  the  shipper,  there  is  sometimes  the  tendency  to  favor  the  buyer 
unduly  in  order  to  retain  his  good  will. 


14 


BULLETIN   267,  U.   S.   DEPARTMENT  OF  AGRICULTURE. 


THE  BROKEB  S  PLACE   IN   DISTRIBUTION. 


Brokers  act  as  market  salesmen  for  those  producers  who  are  unable 
to  make  direct  sales  and  who  have  no  other  market  representative. 
They  represent  shippers  at  large  distribution  centers,  and  by  the 
payment  of  the  very  small  brokerage  fee  the  shipper  can  be  certain 
that  his  goods  will  be  accepted  on  arrival.  The  broker,  by  making 
prompt  disposition  of  a  consignment  immediately  upon  arrival,  often 
saves  the  shipper  many  times  the  brokerage  fee.  Brokers  stimulate 
and  expand  the  market  to  a  certain  extent  by  their  expert  canvassing 
of  the  trade  and  any  influence  that  stimulates  active  buying  and 
selling  must  be  regarded  favorably.  In  general,  their  chief  useful- 
ness lies  in  the  fact  that  their  activities  on  the  market  tend  to  main- 
tain a  steady  flow  of  business. 

AUCTION  SALES. 

Auction  companies  are  organizations  (usually  incorporated  as 
stock  companies)  which  sell  fruits  at  public  sale  to  the  highest 
bidder.  The  auction  offers  an  outlet  for  a  great  deal  of  produce 
that  can  not  find  immediate,  direct  sale.  Those  who  sell  through  an 
auction  may  be  brokers  (representing  shippers  and  associations), 
speculators,  operators,  car-lot  wholesalers,  and  in  rare  cases  indi- 
vidual shippers.  Sales  are  made  largely  to  jobbers.  Before  sales 
are  started  a  display  is  made  in  the  showrooms.  Produce  to  be  sold 
is  divided  into  "lines"  which  consist  of  from  1  to  100  or  more 
packages.  Each  line  is  marked  with  a  designating  number  and 
listed  in  definite  order  on  the  various  sheets  which  make  up  the 
"  catalogue."  Before  bidding  starts  buyers  who  are  interested  in  the 
day's  offerings  make  careful  inspection  of  the  various  lines  and  make 
notes  on  the  catalogue  as  to  comparative  values.  By  the  time  of  the 
opening  of  a  sale  each  buyer  has  a  pretty  definite  idea  of  the  value 
of  the  various  lines  in  which  he  is  interested. 

Sales  start  at  a  definite  hour  and  are  conducted  much  as  other  auc- 
tion sales  are  handled.  Bids  are  started  at  a  fairly  low  figure  and  the 
final  price  received  is  dependent  to  a  large  extent  on  the  size  of  the 
day's  offerings  and  the  activity  of  the  bidding.  After  other  offer- 
ings have  been  disposed  of  miscellaneous  broken  packages  are  sold. 
As  sales  are  made  prices  are  listed  opposite  the  number  of  the  line 
on  the  catalogue.  A  complete  catalogue  with  the  prices  received  for 
the  goods  listed  opposite  the  lines  is  known  as  a  "  realizer."  Sales 
are  supposed  to  be  strictly  for  cash,  and  since,  as  a  rule,  single  lines 
are  not  of  any  great  size  the  amounts  due  in  each  case  are  not  very 
large. 


% 


WHOLESALE  DISTRIBUTION   OF  FRUITS  AND  VEGETABLES.         15 


AUCTION  CHARGES. 


Auction  service  charges  are  from  2  to  15  per  cent  (usually  3  per 
cent)  on  gross  selling  price.  "Where  the  selling  charge  is  imder  5 
per  cent  a  "  terminal  charge  "  to  cover  costs  of  unloading  and  han- 
dling is  sometimes  added.  This  terminal  charge  is  paid  by  the  buy- 
ers and  is  simply  a  means  for  securing  increased  revenue,  since  busi- 
ness reasons  make  it  necessary  for  certain  auctions  to  handle  goods 
on  a  very  low  selling  charge,  and  some  additional  income  is  needed 
to  offset  the  costs  of  doing  business.  Since  the  auction  itself  oper- 
ates strictly  on  a  nonspeculative  basis  its  costs  are  fixed,  in  a  measure, 
and  as  a  rule  consist  of  such  charges  as  rental,  interest  on  invest- 
ment, and  employment  of  help. 


AUCTION  ABUSES. 


One  weakness  of  auctions  lies  in  the  possibility  of  manipulating 
the  sales  so  that  goods  sold  on  certain  days  will  not  move  at  true 
market  prices.  In  some  cases  members  of  the  distributing  trade  in 
certain  cities  may  be  interested  financially  in  the  local  auction.  In 
such  cases  it  is  possible  that  the  business  will  be  conducted  so  as 
to  favor  those  who  are  supporting  the  auction.  Thus,  those  who  are 
interested  financially  may  secure  more  or  less  extended  credit,  while 
all  others  must  deal  on  a  strictly  cash  basis.  This,  of  course,  would 
give  an  immense  advantage  to  those  especially  favored  and  tend  to 
create  dissatisfaction  among  the  greater  number  of  buyers. 

Another  weakness  lies  in  the  possibility  of  tampering  with  sample 
boxes  in  particular  lines.  However,  in  justice  to  the  many  reputable 
auctions  operating  in  different  parts  of  the  country,  it  should  be  said 
that  there  is  little  evidence  that  any  of  the  abuses  mentioned  affects 
the  great  volume  of  business  handled  daily  by  them. 

ADVANTAGES  OF  THE  AUCTION. 

Auctions  offer  quick  outlets  for  fruits  which  must  be  kept  moving 
in  a  more  or  less  steady  stream  from  producer  to  consumer.  Large 
quantities  of  citrus  fruits  are  sold  at  auction  on  several  of  our  large 
markets.  When  this  fruit  starts  toward  market  there  arises  the 
necessity  for  keeping  a  steady  stream  flowing  to  the  consuming 
public,  and  the  auction  provides  one  means  whereby  distributing 
channels  are  continuously  supplied.  Auctions  offer  an  outlet  for  sur- 
plus holdings  on  well-stocked  markets,  and,  by  attracting  buyers, 
tend  to  expand  the  market  to  a  certain  extent.  They  afford  a  good 
index  of  market  conditions,  and  when  the  auction  company  sells 
the  major  part  of  the  supply  of  certain  commodities  or  is  patronized 
by  most  of  the  buyers,  it  tends  to  be  a  more  or  less  accurate  deter- 
miner of  basic  wholesale  prices. 


16 


BULLETIN  267,  U.  S.  DEPAHTMENT  OF  AGBICULTUBE. 


/'\ 


WHOLESALE   DISTRIBUTION   OP  FRUITS  AND  VEGETABLES.  17 


IH 

II 


CAR-LOT  WH0LESALEB8. 

A  very  important  factor  in  market  distribution  is  the  car-lot  whole- 
saler. These  men  purchase  fruits  and  vegetables  from  cooperative 
associations,  country  merchants,  car-lot  assemblers,  traveling  buyers, 
buying  brokers,  individual  growers,  speculators,  and  city  brokers. 
They  distribute  goods  to  the  jobbing  and  retail  trade  or  to  the  coun- 
try trade.  Thus  it  will  be  seen  that  their  activities  cover  a  wider 
field  than  do  those  of  almost  any  other  type  of  distributor. 

A  large  part  of  the  business  done  by  the  car-lot  wholesaler  is 
transacted  very  early  in  the  day.  Most  of  these  early  morning  side- 
walk sales  are  for  cash,  and  in  a  great  many  cases  the  buyer  does  his 
own  delivering.  Later  in  the  day,  beginning  about  8  or  9  o'clock 
in  the  morning,  telephone  orders  come  in  from  grocers  all  over  the 
city  for  deliveries  to  be  made  later  in  the  day.  The  greater  portion 
of  this  business  is  for  credit,  but  settlement  is  usually  demanded 
within  a  period  of  one  or  two  weeks.  Still  later  in  the  day  shipments 
are  made  up  for  distribution  to  country  customers  in  neighboring 
towns.  Thirty  to  sixty  days'  credit  is  extended  to  these  customers. 
The  orders  from  this  country  trade  may  be  by  telegram,  by  letter,  or 
through  private  traveling  salesmen.  As  a  rule,  these  sales  to  the 
country  trade  are  the  most  uniformly  profitable  of  any  to  the  car-lot 
wholesaler.  Prices  charged  are  usually  slightly  higher  than  can  be 
secured  from  resident  buyers  on  the  market.  This,  of  course,  is  justi- 
fied, as  extra  packing  and  cartage  charges  are  involved.  The  country 
trade,  as  a  rule,  makes  little  attempt  to  keep  in  close  touch  with 
market  prices,  but  prefers  to  place  orders  regularly  with  selected 
wholesalers  or  jobbers  and  depend  upon  receiving  fair  treatment. 

In  addition  to  selling  to  the  retail  trade,  popularly  known  as 
"  retailing,"  car-lot  wholesalers  distribute  considerable  quantities  of 
goods  to  jobbers.  The  "  jobbing  price,"  it  should  be  noted,  is  usually 
less  than  prices  charged  the  retail  trade  for  the  same  articles.  This 
lower  jobbing  price  is,  of  course,  to  protect  the  jobber  and  insure 
him  at  least  a  small  margin  or  profit  when  he,  in  turn,  sells  to  the 
retailer. 

SALES  0X7T  OF   STORAGE  AND  CLEAN-UP  SALES. 

Many  car-lot  wholesalers  buy  when  prices  are  cheap  and  put  the 
produce  in  storage,  distributing  later  when  prices  admit  of  a  fair 
profit.  This  involves  a  certain  element  of  risk,  as  a  market  may  not 
take  on  a  better  tone  in  time  for  the  wholesaler  to  move  his  stored 
goods  to  advantage.  Some  of  the  heaviest  losses  in  the  wholesale 
trade  are  the  direct  result  of  dealing  in  stored  goods. 

After  a  heavy  day's  sale  there  is  usually  a  considerable  amount 
of  miscellaneous  produce  left  on  hand.  At  this  point  hucksters  and 
peddlers  purchase  the  odds  and  ends  that  are  unsold  and  clear  the 


7 


^llfc-..ir'...-^jgt 


market  for  the  next  day's  offerings.  These  sales  are  to  be  com- 
mended, as  considerable  quantities  of  low-grade  stuff  are  thus  placed 
within  the  reach  of  the  consumer  at  reasonable  rates,  and  the  practice 
serves  to  rid  the  market  of  a  surplus  of  low-grade  produce. 

COSTS  AND  PSOFITS. 

Profits  to  the  car-lot  wholesaler  vary  greatly.  Since  he  deals 
very  largely  in  perishables  in  large  quantities  and  on  his  own  ac- 
count, his  aim  is  to  make  as  much  profit  as  possible  on  each  sale. 
He  has  better  chances  to  make  wide  margins  than  has  the  jobber, 
because  in  many  instances  he  deals  directly  with  the  farmer,  who  is 
an  inexperienced  seller  and  unfamiliar  with  market  methods.  How- 
ever, the  car-lot  wholesaler  buys  in  large  quantities  for  future  sale 
and  thus  takes  greater  risks  than  the  jobber,  who  buys  in  small 
quantities  from  day  to  day,  moves  goods  rapidly,  and  in  cases  of 
sharp  market  declines  is  able  to  close  out  very  quickly. 

Average  net  profits  at  this  step  in  distribution  are  usually  less 
than  is  popularly  supposed.  For  instance,  during  the  fall  of  1914 
apples  were  handled  in  Chicago  and  Kansas  City  on  a  gross  margin 
of  25  cents  a  barrel,  oranges  at  10  and  15  cents  a  box,  and  lemons  at 
25  cents  a  box.  The  margin  of  profit  varies  greatly  on  individual 
sales  and  ranges  from  less  than  nothing  to  50  per  cent.  Business 
competition  is  usually  very  keen  and  prevents  any  long-continued, 
excessive  margin  or  profit.  The  car-lot  wholesaler's  business  is  sub- 
ject to  all  overhead  fixed  charges,  such  as  interest  on  investment, 
labor,  and  rentals,  and  in  addition  he  is  subject  to  the  costs  of  much 
extra  service,  such  as  resorting,  repacking,  and  the  making  of  special 
deliveries.  Considering  his  costs  of  doing  business  and  the  services 
which  he  renders,  the  car-lot  wholesaler  probably  operates  on  as 
small  a  margin  of  profit  as  any  middleman  concerned  in  food 
distribution. 

FUNCTIONS    PERFORMED    BY    CAB-LOT    WHOLESALERS. 

These  men  perform  the  absolutely  essential  functions  of  acting  as 
primary  distributors  of  produce  arriving  at  market  in  car  lots.  Any 
reforms  which  may  be  accomplished  in  distributive  methods  must 
take  into  consideration  the  fact  that  some  definite  agency  must  under- 
take the  work  of  breaking  car  lots  and  starting  distribution  at  market 
centers.  Hence,  the  car-lot  wholesaler  is  undoubtedly  a  highly  im- 
portant element  in  present-day  distributing  machinery. 

SALES  THROUGH  COMMISSION  MERCHANTS. 

The  commission  merchant  is  a  professional  agent  whose  business 
is  the  selling  of  goods  on  commission.     He  has  possession  of  the 


i 


I 

ll 


18 


BULLETIN  267,  TJ.   S.  DEPARTMENT  OP  AGRICULTURE. 


commodities,  and  all  transactions  are  in  his  own  name.  He  may  dic- 
tate terms  and  methods  of  sale,  but  must  obey  instructions  if  given, 
and  he  is  responsible  to  the  shipper  only  for  a  proper  accounting  in 
the  final  terms. 

Commission  men  solicit  shipments  from  growers,  car-lot  assem- 
blers, and  cooperative  associations.  It  should  be  stated,  however, 
that  cooperative  associations  do  not  favor  the  promiscuous  consign- 
ment of  their  products  and  seek  to  eliminate  this  method  as  far 
as  possible.  Consigning  is  a  very  common  means  for  disposing  of 
less  than  car-lot  shipments  and  offers  practically  the  only  means  for 
disposing  of  poor,  unstandardized  products  which  could  find  no 
direct  sale  to  the  wholesale  trade.  Commission  merchants  handle 
goods  for  5  to  10  per  cent  of  the  gross  selling  price.  In  many  cases, 
however,  the  dealer,  by  sharp  practices,  increases  his  margin  to  15 
per  cent  or  over.  As  sales  are  made  he  presumably  keeps  a  careful 
record  of  each  man's  transactions,  but  may  or  may  not  give  the  con- 
signor this  detailed  information  as  to  the  distribution  of  the  ship- 
ment. As  soon  as  the  shipment  is  "  closed  out "  the  commission  man 
deducts  freight  and  other  expenses  and  his  charges  and  remits  the 
balance  to  the  shipper,  together  with  an  "  account  sales."  Costs  of 
doing  business  are  much  the  same  as  for  the  car-lot  receiver. 


ABUSES  BY  COMMISSION  MERCHANTS. 


One  charge  made  against  dealers  of  this  type  is  that  they  some- 
times remit  more  than  the  market  price  to  a  new  shipper  in  order  to 
get  future  business.  As  this  does  not  give  the  shipper  a  fair  idea  of 
the  market  and  does  give  him  a  false  impression  of  the  dealer's  abil- 
ity as  a  salesman,  it  is  a  practice  which  should  be  regarded  with 
great  disfavor  by  all  interests  in  the  market.  Another  malpractice 
sometimes  attributed  to  commission  merchants  is  selling  for  more 
than  the  market  price  and  remitting  to  the  shipper  on  the  basis  of  the 
market  price.  Many  have  regarded  this  practice  as  legitimate,  be- 
cause the  increased  selling  price  is  not  due  to  the  superior  quality  of 
the  goods  sold  but  to  the  dealer's  excellent  salesmanship.  These 
practices  certainly  are  not  common  to  most  commission  men  and  are 
not  universal,  as  is  generally  supposed.  Much  that  the  shipper  con- 
siders dishonest  can  be  explained,  his  suspicions  being  due  to  mis- 
understanding, or  the  trouble  maybe  traceable  to  the  shipper  himself. 

The  commission  merchant  occupies  a  rather  difficult  position  with 
respect  to  his  dealings  with  shippers  and  shipping  associations.  The 
handling  of  large  quantities  of  fruits  and  vegetables  involves  a 
greater  opportunity  for  mutual  misunderstanding  than  almost  any 
other  line  of  business.  The  very  facts  that  the  commission  merchant 
assimies  complete  charge  of  goods  intrusted  to  him,  that  distribution 


f>' 


i 


WHOLESALE  DISTRIBUTION   OF  FRUITS  AND  VEGET^VBLES. 


19 


is  effected  according  to  the  commission  man's  own  ideas,  and  that  the 
shipper's  returns  are  in  direct  proportion  to  the  dealer's  honesty  and 
ability,  all  tend  to  encourage  a  suspicious  attitude  on  the  part  of  the 
producer.  It  is  not  because  commission  men  as  a  class  have  proven 
to  be  dishonest,  but  the  very  fact  that  the  commission  man  has  great 
opportunities  for  dishonesty,  if  he  chooses  to  avail  himself  of  them, 
has  caused  shippers  to  condemn  unhesitatingly  any  practices  which 
did  not  appear  to  be  perfectly  plain. 

A  shipper  is  seldom  able  to  inspect  his  own  output  with  an  un- 
prejudiced eye.  The  car  which  he  is  shipping  usually  appears  better 
to  him  than  does  his  neighbor's  offering.  The  buyers  with  whom  the 
commission  merchant  must  deal,  however,  have  no  such  biased  view- 
point. The  shipper's  goods  are  compared  critically  with  competing 
offerings  from  many  sections  and  quality  and  pack  are  the  sole  de- 
ciding factors  which  determine  relative  values.  Often,  therefore, 
the  shipper  who  considers  his  goods  on  a  par  with  the  best  market 
offerings  is  disappointed  when  returns  are  below  the  figures  listed 
on  current  wholesale  quotations.  The  dealer,  who  may  have  exerted 
every  effort  on  behalf  of  his  shipper,  is  then  accused  of  dishonesty 
in  that  returns  were  not  up  to  expectations. 

Often,  too,  perishables  which  leave  the  point  of  origin  in  first- 
class  shape  arrive  at  destination  in  a  greatly  deteriorated  condition, 
must  be  repacked  or  regraded  by  the  commission  men,  and  finally 
sold  at  a  considerable  loss  to  tKfe  shipper.  The  grower,  who  last  saw 
his  produce  in  first-class  marketable  condition,  does  not  understand 
or  appreciate  the  conditions  which  were  responsible  for  this  loss. 

In  general,  it  may  be  said  that  a  large  part  of  the  stigma  which 
attaches  to  the  business  of  the  commission  merchant  arises  directly 
from  the  difficult  position  which  this  middleman  occupies  in  dis- 
tributive machinery. 

PLACE   OF   THE   COMMISSION    MERCHANT   IN    DISTRIBUTION. 

Commission  houses  offer  almost  the  only  good  outlet  for  imstand- 
ardized  goods  which  can  not  be  sold  direct  to  the  wholesale  trade. 
Acting  as  primary  receivers  of  less  than  car-lot  shipments,  they  serve 
as  a  medium  through  which  to  market  all  goods  which  can  not  be 
sold  direct  to  car-lot  wholesalers,  and,  when  honest  and  efficient,  they 
offer  to  inexperienced  shippers  the  valuable  services  of  trained  mar- 
ket experts  in  disposing  of  their  produce. 

JOBBERS'  SALES. 

Next  in  importance  to  car-lot  wholesalers  on  large  markets  is  the 
jobbing  trade.  Jobbers  are  middlemen  at  distributing  centers  who 
usually  buy  in  less-car-lot  quantities  from  car-lot  wholesalers  or 


-II  mi 


I 


20 


BULLETIN  261,  U.   S.   DEPARTMENT  OF  AGRICULTURE. 


commission  men  and  in  turn  sell  to  the  retail  trade;  in  other  words, 
they  are  intermediaries  between  primary  receivers  and  retailers. 
The  term  as  here  used  must  be  distinguished  from  the  term 
"jobber"  as  used  in  connection  with  wholesale  distribution  for 
manufacturing  c(Micerns,  where  the  jobber  distributes  the  total  out- 
put of  several  factories  direct  to  large  wholesale  houses. 

Jobbers  in  fruits  and  vegetables  get  their  supplies  from  com- 
mission merchants,  car-lot  wholesalers,  auctions,  and  public  markets, 
and  in  turn  sell  to  the  retailer  or  to  other  jobbers.  The  chief  outlet 
for  the  jobber,  however,  is  the  retailer.  Methods  of  sale  by  jobbers 
and  car-lot  wholesalers  are  practically  identical.  The  jobber,  acting 
as  the  intermediary  between  the  car-lot  wholesaler  and  the  retailer, 
buys  in  less  than  car  lots,  as  a  rule,  makes  quick  sales,  operates  on  a 
relatively  small  margin,  and  secures  his  profits  by  rapidly  turning 
over  his  capital. 

In  general,  the  jobber  is  subject  to  much  the  same  charges  and 
costs  of  doing  business  as  the  car-lot  wholesaler.  Often,  however, 
these  costs  are  relatively  less  in  proportion  to  the  quantity  of  produce 
handled.  The  jobber  usually  has  a  smaller  initial  investment  than 
the  car-lot  wholesaler,  hence  his  general  expenses  may  not  run  quite 
so  high. 

THE  JOBBEB's  place  IN  DISTRIBUTION. 

The  jobber's  chief  usefulness  at  the  present  time  is  in  facilitating 
the  rapid  distribution  of  extremely  perishable  products.  A  car  of 
strawberries,  for  instance,  will  usually  be  disposed  of  much  more 
rapidly  when  handled  by  several  jobbers  than  would  be  the  case  if 
a  single  car-lot  wholesaler  attempted  to  complete  the  distribution  to 
the  retail  trade.  With  the  growth  of  standardization,  better  grad- 
ing and  packing,  together  with  greater  efficiency  in  the  business  of 
car-lot  receivers,  it  is  possible  that  many  of  the  present  functions  of 
the  jobber  may  be  assumed  by  the  car-lot  wholesaler.  This  applies 
to  our  smaller  markets  especially.  On  the  great  terminal  markets, 
however,  the  jobbers  must  remain  important  factors  for  some  time 
to  come.  In  these  cities  they  sell  to  the  vast  number  of  those  retailers 
who  buy  in  small  quantities  and  who  can  not  take  time  or  trouble 
to  go  to  primary  markets  and  select  their  goods. 

If  the  entire  retail  trade  were  to  attempt  to  get  in  direct  touch  with 
car-lot  wholesalers  on  our  large  markets,  the  congestion  of  business 
would  be  so  great  as  to  block  most  seriously  the  economical  move- 
ment of  perishable  food  products. 

PUBUC  MARKETS. 

Public  markets  draw  a  considerable  portion  of  their  supplies 
from  producers  in  neighboring  districts.    They  are  patronized  by 


*^^rfV^  • 


^f^ 


WHOLESALE  DISTRIBUTION   OF  FRUITS  AND  VEGETABLES. 


21 


f^        > 


jobbers,  retailers,  and  consumers  and  enable  some  produce  to  pass 
directly  from  the  grower  to  the  consumer.  As  a  rule  they  are  not 
highly  important  factors  in  the  distribution  of  perishables  arriving 
in  car  lots  from  distant  production  areas.  During  late  years  more 
and  more  attention  has  been  directed  toward  extending  the  useful- 
ness of  this  form  of  distribution.* 

DISTRIBUTION  CHANNELS. 

The  foregoing  discussions  indicate  in  a  general  way  the  great  com- 
plexity which  attends  the  distribution  of  food  products.  The  im- 
pression may  have  been  left,  however,  that  all  perishables  pass 
through  each  of  the  steps  in  distribution  which  have  been  noted. 
This  is  not  the  case,  as  various  factors  decide  what  channels  each 
shipm^at  is  to  take.  A  complete  discussion  of  the  various  means 
by  which  produce  is  collected,  concentrated  at  market  centers,  and 
finally  distributed  to  consumers  is  impracticable  in  a  publication  of 
this  kind.  Perhaps  the  subject  can  be  made  more  clear  by  graphic 
representation  of  the  more  common  steps  in  distribution. 

In  figure  2  the  interlocking  circles  are  intended  to  show  the  inti- 
mate relationship  existing  between  certain  of  the  agencies  interested 
in  distribution.  Thus  the  grower  may  operate  individually  or  he 
may  combine  with  his  neighbors  and  all  do  business  collectively  or 
through  a  cooperative  organization.  On  the  other  hand,  one  firm 
often  performs  the  functions  of  the  car-lot  wholesaler,  the  commis- 
sion merchant,  and  the  jobber,  and  the  business  details  overlap  in 
such  a  way  that  it  is  difficult  to  dissociate  the  three  lines  of  business. 
In  a  single  diagram  of  this  kind  it  is  impossible  to  indicate  all  the 
possibilities.  Attention  has  been  confined,  therefore,  to  primary  dis- 
tributing channels. 

An  attempt  has  been  made  to  emphasize  the  routes  through  which 
the  great  bulk  of  traffic  passes.  Perishables  do  not-  and  can  not 
pass  through  the  hands  of  all  the  distributing  agencies  which  are 
indicated.  As  a  matter  of  fact,  usually  only  a  few  agencies  are 
instrumental  in  handling  the  contents  of  any  given  car.  The  con- 
tents of  two  cars  coming  to  a  large  market  on  the  same  day  may  pass 
into  consumption  through  very  different  channels.  Thus  one  car 
may  be  consigned  to  a  commission  merchant,  who  divides  the  car 
among  a  large  number  of  jobbers  and  retailers,  while  the  other  car 
may  be  purchased  by  a  buyer  for  a  car-lot  wholesaler  who  sells  to 
the  jobbing  and  retail  trade.  In  either  case  the  retailer  is  the  inter- 
mediary with  whom  the  consumer  comes  in  contact. 

1  For  a  discussion  of  the  place  and  needs  of  city  markets,  see  "  Retail  Public  Markets," 
by  G.  V.  Branch,  Yearbook  U.  S.  Dept.  of  Agriculture,  1914,  pp.  167-184.  (Y.  B.  Sepa- 
rate 636.) 


22 


BULLETIN   267,  U.   S.   DEPARTMENT  OF   AGRICULTURE. 


There  are  usually  very  definite  reasons  why  good's  coming  to 
market  pass  on  to  consumption  through  such  diverse  channels. 
Among  those  factors  which  decide  along  what  course  and  through 
what  hands  perishables  shall  pass  in  going  from  producer  to  con- 
sumer are:  (1)  The  condition  or  tone  of  the  market;  (2)  grade, 
pack,  and  quality  of  the  shipment;   (3)  district  in  which  the  ship- 


4'} 


Pig.  2. — Main  channels  of  distribution  for  fruits  and  vegetables. 

ment  originates;  and  (4)  the  shipper's  knowledge  of  market  con- 
ditions. 

As  a  rule,  certain  types  of  distributors  handle  most  of  the  produce 
coming  to  market.  One  principal  line  of  distribution  is  from  grower 
to  car-lot  wholesaler,  to  jobber,  to  retailer,  to  consumer.  Goods 
consigned  on  commission  may  pass  from  grower  to  commission  man, 
to  retailer,  to  consumer.  The  car-lot  wholesaler,  commission  mer- 
chant, jobber,  and  retailer  are  highly  important  market  factors, 


^ 


^^^ 
S 


WHOLESALE  DISTRIBUTION   OF  FRUITS  AND  VEGETABLES.         23 

and  collectively  handle  the  great  bulk  of  all  perishable  food  products 
coming  into  the  city.  The  diagram  (fig.  2)  is  not  intended  as 
either  a  justification  or  a  condemnation  of  present  market  practices 
but  rather  to  portray  distributing  machinery,  its  importance,  and  the 
relation  of  its  several  parts  in  the  present  scheme  of  marketing. 

LOSSES  AND  WASTES. 

Losses  and  wastes  due  to  deterioration  of  goods  are  heavier  than  is 
usually  believed,  and  especially  is  this  true  in  the  case  of  perishables. 
On  such  commodities  as  strawberries,  peaches,  and  grapes  the  losses 
sometimes  amount  to  30  or  40  per  cent  of  the  whole.  Out  of  one  car 
of  bulk  Ben  Davis  apples  from  the  Ozarks  which  went  to  a  large 
neighboring  market  19  per  cent  was  lost  before  the  fruit  reached 
the  hands  of  the  retail  trade.  Losses  due  to  spoiling  may  be  the 
result  of  the  shipper's  sending  overripe  or  diseased  fruit,  or  failing 
to  give  proper  attention  to  packing,  to  loading,  or  to  bracing  the 
packages  in  the  car.  Sometimes  the  railroad  is  at  fault.  Delay  in 
transit,  improper  ventilation  or  refrigeration,  or  unnecessarily  rough 
handling  of  cars  may  contribute  to  rapid  deterioration  of  the  ship- 
ment on  arrival. 

The  lack  of  proper  refrigeration  facilities  at  distributing  centers 
is  a  cause  of  much  loss.  When  produce  moves  slowly,  there  is  often 
much  spoilage  before  complete  sales  can  be  made.  Rough  handling 
during  unloading  or  carting  is  another  important  cause  of  loss.  As 
a  matter  of  fact,  the  opportunities  for  losses  due  to  the  spoiling  of 
commodities  are  so  manifold  that  it  is  impossible  to  enter  into  a  com- 
plete discussion  of  them. 

In  any  discussion  of  losses  and  wastes  it  is  always  well  to  bear  in 
mind  the  really  serious^de  of  this  question.  The  spoiling  of  a  dozen 
cantaloupes,  a  basket  of  grap^,  or  .i  crate  of  strawberries  represents 
an  absolute  loss  to  the  community.  No  benefit  accrues  to  producer, 
distributor,  or  consumer  from  such  a  condition.  The  loss  occurring 
at  this  point  must  be  borne  both  by  producer  and  consumer,  and  in  a 
great  many  cases  the  distributor  must  bear  his  part  of  the  burden. 
In  many  cases  losses  and  wastes  are  entirely  too  heavy  a  tax  on  food 
distribution.  It  is  probably  safe  to  say  that  the  elimination  of  un- 
necessary wastes  would  do  as  much  toward  effecting  permanent,  sub- 
stantial econctfnies  ii\marketing  and  distributing  as  any  readjustment 
of  present  marketing  methods  could  do.  The  fact  that  a  large  per- 
centage of  these  losses  can  be  avoided  by  proper  grading,  packing,  and 
shipping,  together  with  prompt,  efficient  handling  while  the  goods 
are  in  process  of  distribution,  makes  it  imperative  that  this  subject 
be  given  special  consideration  by  those  interested  in  the  efficient 
marketing  of  farm  crops. 


\ 


24 


If 


BULLETIN   267,  U.   S.  DEPARTMENT  OF  AGRICULTUBB. 


CONCLUSION. 


The  car-lot  movement  of  fruits  and  vegetables  from  distant  pro- 
duction areas  to  large  distribution  centers  has  assumed  its  present 
importance  during  the  last  20  years.  This  means  that  our  pres- 
ent marketing  methods  are  of  comparatively  recent  origin.  Many 
believe  that  the  solution  of  present  marketing  problems  would  be 
reached  by  a  return  to  the  simple,  direct  methods  which  sufficed  for 
the  preceding  generation.  It  should  be  borne  in  mind,  however,  that 
our  present  market  machinery  has  been  evolved  because  changing 
conditions  of  supply  have  made  necessary  many  changes  in  the 
methods  of  handling  food  products. 

A  knowledge  of  the  manner  in  which  perishables  were  handled  and 
marketed  40  years  ago  helps  very  little  toward  solving  present  diffi- 
culties. Any  intelligent  attempt  to  better  marketing  conditions  must 
be  based  on  a  good  working  knowledge  of  present  agencies  and  their 
functions.  The  nearer  that  both  producer  and  consumer  can  come 
to  an  understanding  and  appreciation  of  the  work  devolving  upon 
the  distributor,  the  nearer  will  we  approach  a  solution  of  many  of 
the  problems  incident  to  the  movement  of  fruits  and  vegetables. 

A  better  knowledge  of  present  methods  of  marketing  would  assist 
greatly  in  clearing  away  many  problems,  even  though  no  changes  in 
the  present  scheme  of  distribution  were  made.  The  shipper  who  has 
a  more  or  less  definite  knowledge  of  the  course  his  goods  will  take 
when  they  reach  a  big  market  has  a  great  advantage  over  the  man 
who  has  no  idea  of  methods  of  distribution.  He  can  safeguard  his 
interests  by  retaining  a  measure  of  control  over  his  product  after  it 
reaches  destination. 

Shippers  or  prospective  shippers  of  fruits  and  vegetables  are  ad- 
vised to  get  in  touch  with  their  principal  market,  learn  its  likes, 
dislikes,  and  peculiarities,  study  the  means  whereby  their  goods  are 
distributed  to  consumers,  and  secure  a  working  knowledge  of  the 
chief  problems  incident  to  the  handling  of  their  commodities. 

SUMMARY. 

1.  In  treating  the  subject  of  market  distribution  of  fruits  and 
vegetables,  an  effort  has  been  made  to  explain  certain  general  prac- 
tices at  large  distribution  centers  which  receive  fruits  and  vegetables 
in  car-lot  quantities. 

2.  The  widening  distance  between  producer  and  consumer  has 
called  into  existence  the  middleman  of  to-day.  The  fact  that  the 
middleman  has  certain  useful  functions  to  perform  makes  it  inadvis- 
able to  eliminate  him  without  arranging  for  some  other  agency  to 
assume  his  duties. 


1 


^■^^ 


V 


vj 


f 


WHOLESALE  DISTRIBUTION   OF  FRUITS  AND  VEGETABLES.         25 

3.  The  shipper  who  starts  a  car  toward  market  should  notify  the 
consignee  in  such  detail  that  prompt  disposition  of  the  goods  may  be 
made  after  the  arrival  of  the  car.  This  notification  is  often  made  by 
telegram  and  should  include  all  information  necessary  to  insure  the 
prompt  acceptance  and  disposal  of  the  shipment. 

4.  As  perishables  should  always  be  inspected  promptly  on  arrival 
at  destination,  the  shipper  should  give  shipping  instructions  which 
permit  inspection  without  unnecessary  delay  at  destination. 

5.  Rejecting  shipments  of  fruits  and  vegetables  is  an  all  too  com- 
mon practice  on  large  markets.  Often  rejection  may  be  justified, 
as  when  goods  have  arrived  in  a  greatly  deteriorated  condition,  but 
sometimes  the  actual  cause  for  rejection  is  simply  a  decline  in  the 

market  price. 

6.  In  case  a  buyer  rejects  a  car  the  shipper  has  the  option  of  selling 
elsewhere  or  making  an  allowance  to  the  original  purchaser  in  order 
to  close  the  transaction  immediately.  Claims  against  railroads  should 
be  filed  in  proper  form  and  supported  by  a  presentation  of  the  facts 

in  the  case. 

7.  Perishables  after  arrival  at  market  pass  on  to  the  consumer 
through  many  channels.  Often,  however,  one  firm  may  combine  the 
functions  of  several  middlemen,  so  that  while  there  are  many  types 
of  distributors  it  does  not  follow  that  goods  actually  change  hands  as 
often  as  a  scrutiny  of  the  list  of  middlemen  might  seem  to  indicate. 

8.  The  fact  that  large  cities  secure  supplies  of  fruits  and  vegetables 
from  distant  producing  areas  has  been  one  of  the  main  causes  of 
increasingly  complex  marketing  methods. 

9.  Brokers  act  as  shippers'  or  buyers'  agents.  They  handle  car  lots 
only  and  offer  their  services  at  very  low  rates.  While  many  brokers 
are  charged  with  abusing  their  privileges,  they  often  save  the  shipper 
several  times  the  brokerage  fee  by  insuring  the  acceptance  of  goods 
at  destination. 

10.  Fruit  auctions  sell  goods  for  shippers,  dealers,  and  others  who 
have  local  representatives  to  withdraw  offerings  if  prices  are  unsatis- 
factory. They  secure  their  revenue  by  levying  definite  assessments 
against  each  package  sold,  and  by  attracting  buyers  and  stimulating 
competition  often  expand  the  market  for  particular  commodities. 

11.  The  car-lot  wholesalers  constitute  one  of  the  most  important 
factors  in  our  large  terminal  markets.  They  handle  great  quan- 
tities of  perishables  annually  and  act  as  primary  distributors  of 
produce  arriving  at  market  in  car-lot  quantities. 

12.  The  commission  merchant  receives  goods  on  consignment  and 
acts  as  the  shipper's  agent  in  disposing  of  these  products  to  the  job- 
bing and  retail  trade.  While  the  commission  merchant  is  viewed 
with  much  suspicion  by  many  shippers,  he  nevertheless  is  a  very 


26 


BULLETIN  28*?,  IT.  S.  DEPAKTMENT  OP  AGRICULTURE. 


important  factor  in  that  he  furnishes  to  shippers  the  services  of  a 
skilled  specialist  in  salesmanship. 

13.  The  jobber  acts  as  a  secondary  distributor,  buying  from  car- 
lot  receivers  and  selling  largely  to  the  retail  trade.  His  chief  use- 
fulness lies  in  facilitating  rapid  distribution  of  highly  perishable 
products  and  in  preventing  a  congestion  of  business  on  large  whole- 
sale markets. 

14.  Public  markets  are  not  important  in  distributing  fruits  and 
vegetables  arriving  at  market  in  car  lots,  but  do  offer  direct  outlets 
for  neighboring  producers. 

15.  Perishables  arriving  at  market  usually  take  certain  definite 
channels  in  passing  on  to  the  consuming  public.  There  are  several 
important  factors  which  decide  just  what  course  the  contents  of 
any  given  car  will  take  in  going  into  consumption. 

16.  Losses  and  wastes  are  a  very  heavy  tax  on  food  distribution. 
The  prevention  of  much  needless  waste  would  reduce  present  mar- 
keting costs  very  materially. 

17.  One  of  the  most  practical  steps  the  shipper  can  take  to  better 
his  condition  is  to  familiarize  himself  with  business  practices  and 
to  secure  a  better  knowledge  of  the  way  his  produce  is  handled  on 
the  market. 

GLOSSARY  OF  TRADE  TERMS  AND  EXPRESSIONS  AS  USED  IN  THIS 

BULLETIN. 

Aeeonnt  sales.  The  statement  which  a  commission  merchant  renders  to  a  ship- 
per showing  what  disposition  has  been  made  of  the  shipper's  goods. 

Allowanee.  The  reduction  in  price  which  a  shipper  malces  to  a  buyer  in  order 
to  induce  the  buyer  to  accept  a  car  that  he  (the  buyer)  has  rejected. 

Auctions.  Organizations  (usually  incorporated  as  stock  companies)  which 
sell  fruits  at  public  sale  to  the  highest  bidder,  charging  a  definite  fee  for 
this  service. 

Aaetion  cataloipies.  Sheets  In  which  the  auction  offerings  for  the  day  are 
Jisted. 

Auction  lines.  The  units  into  which  auction  offerings  are  divided  before  being 
exposed  for  sale.  Each  line  is  composed  of  packages  of  one  commodity  of 
the  same  size,  grade,  and  type. 

Auction  realizer.  A  statement  which  shows  the  prices  at  which  goods  were 
sold  by  the  auction. 

Auction  terminal  charge.  A  package  charge  levied  on  the  buyers  by  some 
auctions.  Supposed  to  cover  the  expenses  of  opening  sample  lines  for  inspec- 
tion and  general  expenses  of  the  auction  company. 

Bill  of  ladingr-  A  written  statement  issued  by  a  carrier  acknowledging  the 
receipt  of  goods  for  transportation.  A  "straight"  bill  of  lading  simply 
authorizes  the  carrier  to  deliver  the  goods  to  the  consignee  at  destination. 
An  "  order  notify  "  or  "  shipper's  order  "  bill  of  lading  requires  that  an  order 
be  Issued  by  the  shipper  before  delivery  of  the  shipment  can  be  made. 

Brokers.  Agents  who  negotiate  the  purchase  or  sale  of  goods.  They  have  no 
financial  interest  in  the  goods  they  handle  and  their  compensation  is  a 
definite  fee. 


^^fs% 


V} 


WHOLESALE  DlSTftlBUTlOlf  OF  PEUlTS  AND  VEGETABLES.        27 

Broken  car.    A  trade  term  referring  to  a  car  from  which  a  part  of  the  contents 

have  been  removed. 

Car-lot  assembler.  A  term  commonly  applied  to  country  merchants  or  buyers 
who  purchase  in  small  lots  and  combine  into  car-lot  quantities. 

€ar-lot  wholesalers.  Distributors  who  buy  fruits  and  vegetables  in  car-lot 
quantities  and  sell  to  the  Jobbing  or  retail  trade. 

Commission  merchant.  A  dealer  on  the  market  who  receives  shipments  on 
consignment  and  sells  to  the  best  advantage,  remitting  the  proceeds  to  the 
shipper  after  deducting  freight,  drayage  and  other  expenses,  and  a  specified 
commission. 

Consignee.    A  party  to  whom  goods  are  consigned  or  shipped. 

Cooperatire  associations.  Organizations  of  producers  incorporated  for  the 
purpose  of  grading,  packing,  shipping,  or  selling  products  grown  by  members 
of  the  association. 

Distributors.  Individuals,  corporations,  or  associations  whose  business  it  is 
to  route,  distribute,  or  market  agricultural  products. 

Draft.  A  written  order  from  one  person  to  another  to  pay  to  the  order  of  the 
drawer  or  of  a  third  person  a  stated  sum  of  money.  In  the  marketing  of 
perishable  products  the  term  "draft"  is  used  most  frequently  to  designate 
that  document  which  is  attached  to  the  bill  of  lading  and  forwarded  through 
the  banks  for  collection. 

luToice.  A  statement  sent  to  a  consignee  which  gives  a  list  of  goods  which 
have  been  shipf»ed  to  the  consignee  in  question. 

Jobbers.  Dealers  at  distributing  centers  who  buy,  usually  in  less  than  car-lot 
quantities,  from  car-lot  wholesalers  or  commission  merchants  and  who  in 
turn  sell  to  the  retail  trade. 

Jobbing  price.    The  price  at  which  the  jobber  buys  his  goods. 

Middlemen.  According  to  popular  usage  this  term  applies  to  all  those  who 
share  in  the  profits  and  losses  incident  to  the  handling  of  goods  between  the 
producer  and  consumer. 

Operators.  Large  wholesale  firms  which  send  their  buyers  or  solicitors  Into 
producing  sections  and  which,  through  representatives  or  branch  houses  In 
several  large  markets,  secure  a  wide  distribution  for  products  which  they 
purchase  or  handle  on  consignment. 

Private  exchanges.  Distributing  organizations  Incorporated  as  stock  com- 
panies and  operated  for  profit.  They  distribute  car-lot  shipments  for  Indi- 
vidual shippers  or  producers'  organizations,  selling  through  salaried  repre- 
sentatives or  brokers. 

Protest,  acceptance  under.     Acceptance  of  a  car  by  the  consignee  with  the 

proviso  that  he  reserves  the  right  to  enter  claim  later  against  the  railroad. 
Retailing.    According  to  strict  Interpretation  this  term  refers  to  sales  made 
by  the  retailer.     On  large  terminal  markets,  however,  selling  to  the  retail 
trade  is  popularly  referred  to  as  retailing. 
Tendee.    One  to  whom  a  sale  is  made. 
Yendor.    One  who  makes  a  sale. 


28  BULLETIN  261,  U.   S.  DEPARTMeN'T  OF  AGBlCULTXJEfi. 


PUBLICATIONS  AVAILABLE  FOR  FREE  DISTRIBUTION. 

Demurrage  Information  for  Farmers.  By  G.  C.  White.  Pii.  27,  1915.  (Depart- 
ment Bulletin  191.) 

A  System  of  Accounting  for  Cooperative  Fruit  Associations.  By  G.  A.  Nahstoll 
ijnd  W.  H.  Kerr.    Pp.  25,  1915.     (Department  Bulletin  225.) 

Strawberry  Supply  and  Distribution  in  19J4.  By  Wells  A.  Sherman,  Houston 
F.  Walker,  and  O.  W.  Schleussner.    Pp.  10,  1915.     (DepartmenJ;  Bulletin  237.) 

Outlets  and  Methods  of  Sale  for  Shipi>ers  of  Fruits  and  Vegetables.  By  J.  W. 
Fisher,  J.  H.  Collins,  and  Wells  A.  Sherman.  Pp.  28,  1915.  (Department 
Bulletin  266.) 

The  Potato  as  a  Truck  Crop.  By  L.  C.  Corbett.  Pp.  24,  1910.  (Farmers* 
Bulletin  407.) 

Storing  and  Marketing  Sweet  Potatoes.  By  H.  C.  Thompson.  Pp.  15,  1913. 
(Farmers'  Bulletin  548.) 

Shipping  Eggs  by  Parcel  Post.  By  Lewis  B.  Flohr.  Pp.  20.  (Farmed  Bul- 
letin 59i.) 

Retail  Public  Markets.  By  G.  V.  Branch.  Pp.  167-184.  (Separate  636  from 
Yearbook  1914.) 

Cooperative  Marketing  and  Financing  of  Marketing  Associations.  By  C.  E. 
Bassett,  C.  W.  Moomaw,  and  W.  H.  Kerr.  Pp.  185-210.  (Separate  637  from 
Yearbook,  1914.) 

PUBLICATIONS  FOR   SALE  BY  THE  SUPERINTENDENT  OF 

DOCUMENTS. 

The  Cold  Storage  of  Small  Fruits.     By  S.  H.  Fulton.     Pp.  28,  plB.  3,  1907. 

(Bulletin  108,  Bureau  of  Plant  Industry.)     Price,  15  cents. 
Factors  Governing  the   Successful   Storage  of  California   Table  Grapes.    By 

A.  V.  Stubenrauch.    Pp.  31,  pis.  8,  figs.  5,  1913.     (Department  Bulletin  35.) 

Price,  10  cents. 
Cooperation  in  the  Handling  and  Marketing  of  Fruit.    By  G.  Harold  Powell. 

Pp.  391^06.     (Separate  516  from  Yearbook,  1910.)    Price,  5  cents. 
The  Precooling  of  Fruit.    By  A.  V.  Stubenrauch.    Pp.  437-448.     (Separate  550 

from  Yearbook,  1910.)     Price,  5  cents. 
Systems  of  Marketing  Farm  Products,  and  Demand  for  such  Products  at  Trade 

Centers.    By  George  K.  Holmes.    Pp.  391.     (Report  98,  OflSce  of  the  Secre- 
tary.)    Price,  25  cents. 


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